Followers

NUFFNANG

22 July 2013

Berita Semasa 22 Julai 2013 ...

Silver sits on shaky ground: Barclays

Speculative positioning has started to tumble since the start of the year and is now some 90% lower, almost flipping into net short territory at the end of June. Silver has swung into net short speculative positioning several times through the 1990s - the last time, 10 years ago - but overall positioning is light in line with a lower price.

“Silver has been the worst performer across precious metals, but we believe it faces further downside risk in the near term. While there is some scope for industrial demand to improve and lend support to prices as the year unfolds, given the muted response to lower prices thus far, we believe this cushion is unlikely to materialise in the coming weeks,” analysts at Barclays Plc said.

The analysts expect prices to average $17.8/oz in Q3 13.

Whether silver is taking its cue from gold on the investment side, or from copper on the industrial side, both are suggesting a softer quarter ahead. The industrial indicators imply there were some signs of consumption recovering at the start of the year, looking at regional trade data, as well as macro data.

However, this quickly gave way to weaker appetite, particularly across Europe, as lower prices failed to motivate buying, revealing the less price-sensitive consumer activity. But it is not the soft industrial activity that prompts our negative outlook for silver, it is, in fact, the element that has helped to plug the sizeable surplus in the market - investor activity.

Speculative positioning has started to tumble since the start of the year and is now some 90% lower, almost flipping into net short territory at the end of June. Silver has swung into net short speculative positioning several times through the 1990s - the last time, 10 years ago - but overall positioning is light in line with a lower price.

But unlike gold, where over 20% of total metal held in trust has been redeemed in the year date, silver ETPs have held up very well. Flows are up, 93 tonnes, in the year to date, despite May delivering the third-weakest month on record with outflows of 209 tonnes. In contrast to gold, investors have seen lower silver prices as a buying opportunity.

Total metal held in trust, sits at 19,567 tonnes, 4% shy of the all-time high of 20,266 tonnes set only in March this year. Of concern, a net 2,381 tonnes of metal was accumulated above $30/oz, some 3,185 tonnes above $25/oz and 4,070 tonnes above $20/oz. Thus at current prices, at least 21% of the metal held in trust is cash negative, implying the scope for redemption suffered across gold.

Of course an investor could have bought shares at say $15/oz and sold at $40/oz, thus the 4,070 is the bare minimum that is under water. Examining the other extreme, i.e., only investors who bought at the lows have sold at a profit, implies some 14-15kt is cash negative.